With inflation on the rise, your money could be in serious trouble. One way to protect yourself from inflation is by investing in stocks that are likely to perform well during times of high prices.
But, what are the best stocks for inflation?
Let’s find out!
4 Stocks to Invest in During Inflation in 2022
While many other stocks could do well during periods of inflation, these four are some of the top stocks to keep an eye on during the inflation period:
1. Berkshire Hathaway (NYSE: BRK.B)
- Current price: $273.86 (As of June 29)
- Market Cap: $604.31b
Berkshire clearly belongs to the inflation proof stocks because it had a good stock performance in the past, with a CAGR of 13.0% for 2017–21 and 14.7% for the 2012–21 period.
In Q1, the company increased its stake in top-holding Apple (AAPL). Apple stock accounts for 42% of the company’s stock portfolio.
Furthermore, in Q1 2022, Buffett’s Berkshire increased its stake in Chevron (CVX) by 316%, buying a substantial interest in Occidental Petroleum (OXY).
They also bought Paramount Global (PARA), the main rivals of Disney+ and Netflix, and the tech giant HP (HPQ).
Why is Berkshire one of the best stocks for inflation in 2022?
- Berkshire Hathaway has done exceptionally well in the first four months of 2022.
- It has a huge stock portfolio valued at more than $300 billion, which includes stakes in nearly 50 public firms, including Apple, Bank of America, American Express, Coca-Cola, and Kraft Heinz.
- It has over $100 billion in cash on hand.
2. Bank of America (NYSE: BAC)
- Current price: $32.26 (As of June 29)
- Market Cap: $259.91b
If you’re looking for the best bank stocks for inflation, we recommend going for the Bank of America.
Despite BAC’s overall revenues growing by a mere 4%, the bank’s adjusted net income witnessed an 85% year-over-year increase, reaching $30.6 billion.
Why should you invest in bank stocks during inflation?
- In FY 2022, Bank of America’s revenue is anticipated to top $94.24 billion.
- In 2022, the company’s adjusted net income margin should level off at 28%, resulting in a $26.8 billion adjusted net income.
- Its current stock price is under $40.
3. Disney (NYSE: DIS)
- Current price: $95.92 (As of June 29)
- Market Cap: $174.71b
The Walt Disney Company is one of the best cyclical stocks for inflation due to its peerless portfolio of entertainment assets.
Due to its diversification, the Walt Disney Company is less susceptible to the effects of inflation than other companies.
For example, if inflation causes the price of gasoline to go up, people may cut back on travel and vacations. However, they will still watch Disney movies and TV shows, and buy Disney merchandise.
So, if you want to find stocks that do well in inflation, you won’t go wrong with Disney.
Why invest in Disney stocks?
- Disney’s streaming services are increasing in popularity. The company had 196.4 million streaming subscribers as of January 1.
- Its theme-park business generated $7.2 billion in revenue.
- Disney has a plethora of long-lasting assets worth $31.427b (Lucasfilm, Marvel).
4. Chevron Corp. (NYSE: CVX)
- Current price: $149.94 (As of June 29)
- Market Cap: $294.60b
If you want to save money while taking advantage of a good dividend reinvestment plan, you should hold onto one of the best energy stocks for inflation — Chevron Corp.
Chevron is one of the largest oil and gas producers in the world, and it also has a strong refining business.
Chevron’s good dividends (3.50%) and plan to invest in future technologies like carbon capture are the main reasons investors find it appealing.
Why should you invest in Chevron stocks?
- In 2022, Chevron’s EPS is expected to jump by a whopping 112.3%, outpacing the average for the industry (70%).
- Chevron’s cash flow has been increasing at a rate of 75.2% year-over-year, which is far greater compared to its competitors, especially if you know that the industry average amounts to 47.7%.
- Chevron’s stock price will continue to rise as long as oil prices stay high, and its investments in lower-carbon fuels may boost its stocks even further.
Are Stocks a Good Investment During Inflation?
Best inflation stocks such as Disney and Berkshire certainly seem like appealing ventures, but is now the right time to invest your funds in stocks and shares, or should you look at other lucrative options?
The effect of inflation on the stock market has been investigated in numerous studies. Most researchers have concluded that higher inflation has been linked to lower equity valuations.
That said, stocks are generally split into two categories: value and growth. Stocks with excellent present cash flows are more likely to develop gradually or decline in the future, while fast-growing stocks are more likely to grow quickly and become unprofitable.
On that note, if you use the discounted cash flow formula to evaluate stocks, you’ll notice that growth stocks are more negatively impacted by rising interest rates than value stocks.
So should you look for stocks to buy during inflation?
The answer is yes since stocks can protect you from inflation (company earnings and revenues rise in line with inflation). However, when it comes to buying stocks, keep in mind that value stocks mostly outperform growth stocks.
There are a few good inflation stocks that may perform well during inflationary times. Keep an eye on these companies and consider adding them to your portfolio if you’re looking for some protection against rising prices.
And remember, no matter what the market does, stay diversified and always consult with a financial advisor before making any major investment decisions.
What stocks do well with inflation?
It seems that value stocks tend to hold their value or increase in value during periods of inflation. This is because value companies usually have solid fundamentals and are less dependent on economic conditions.
On the other hand, growth stocks may suffer during inflation because their prices are based on future earnings, which are difficult to predict in an inflationary environment.
What stocks to buy during inflation?
Companies with high dividend yields and low stock prices are often a good choice, as they offer a way to protect your money from rising prices.
In our opinion, some of the best stocks for inflation are Disney, Chevron, Berkshire Hathaway, and the Bank of America.